What Is a One-Pay Lease?

A person looks at a new car.
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DEFINITION
A one-pay lease is a document that requires you to make a single lump-sum payment upfront and no additional payments during the lease period for your vehicle.

With a one-pay car lease, you make one large, lump-sum payment instead of dozens of monthly payments. While this type of lease requires a higher upfront cost than a traditional lease, it offers savings in the long run.

Automobile leasing companies use a complex set of factors to determine the cost of lease payments. While you can negotiate to reduce your auto payments, a one-pay lease offers even greater savings.

Key Takeaways

  • One-pay automobile leases require you to make one large, lump-sum payment rather than monthly payments.
  • A one-pay lease can offer substantial savings.
  • One-pay leases are often easier to qualify for than monthly-installment leases.

One-Pay Lease Definition and Example

With a one-pay lease, you make a single lump-sum payment upfront, and no additional payments during the lease period for your vehicle. Dealers often offer a more favorable rate to customers who choose a one-pay lease.

  • Alternate name: single-pay lease

Let’s say you opt for a 36-month car lease, with payments of $300 per month. During the lease period, you’ll pay a total of $10,800. But if the dealer offers a one-pay lease that reduces the monthly charges by $20, you could make a single payment of $10,080 at the beginning of the lease and forego additional payments. In the end, you’d save $720.

How One-Pay Leases Work

Leasing a vehicle is a popular alternative to buying a car. Drivers often opt for leasing if they don’t have the money for a costly down payment or don’t wish to own an automobile. Typically, a lease agreement requires making monthly payments, often comparable to an auto loan payment.

To understand how a one-pay lease works, you must first understand how car leasing works.

Vehicle Leasing Process

Lease agreements enable you to drive the leased automobile for a specific number of months and miles. For instance, you may lease a car for 48 months and 15,000 miles per year.

If you return the vehicle at the end of the lease, you may have to pay end-of-lease charges such as excess mileage or excess wear and tear. If you return the car before the end of the lease, you’ll have to pay early-termination costs. Lease agreements typically give you the option to buy the automobile at the end of the contract.

Lease Payments

Car leasing companies use several factors when calculating lease payments, including:

Gross capitalized cost: This represents the value of the car. The gross capitalized cost may also include items such as insurance or a service contract. You can negotiate the gross capitalized cost.

Capitalized cost reduction: Capitalized cost reduction is anything that decreases the gross capitalized cost, such as a manufacturer’s rebate or trade-in allowance.

Adjusted capitalized cost: This is the gross capitalized cost minus any capitalized cost reductions. For example, if a vehicle’s gross capitalized cost equals $25,000, and you have a trade-in allowance of $5,000, the adjusted capitalized cost would be $20,000.

Residual value: This is the estimated value of the automobile at the end of the lease term. The leasing agent will calculate the residual value at the beginning of your contract. The car’s actual value at the end of the contract can depend on several factors, including its condition and mileage.

Since the age of a vehicle at lease-end will be used to determine a car’s residual value, opting for a shorter-term lease can help ​​increase your car’s residual value.

Depreciation: This factor estimates the amount of monetary value the vehicle will lose during the lease period. Your lease agent will calculate the depreciated value by subtracting the residual value from the adjusted capitalized value.

Rent charge: The rent charge is not the monthly rental rate, but a charge similar to a loan interest rate. This charge is usually determined by using a money factor, which is set by the bank or lending agency based on your credit score and history and the commission markup of the leasing agent.

Lease payments: The lease payments equal the length of the lease. For instance, if you choose a 36-month lease, you’ll make 36 lease payments.

With a one-pay lease, you make only one payment. So if you have a 24-month lease, you can use the car for two years, but you’ll only make one large, lump-sum payment.

Other charges may also apply to monthly payments or a lump-sum payment, including sales and use taxes.

Pros and Cons of a One-Pay Lease

Pros
  • No monthly payments

  • You’ll save on interest charges

  • May be easier to qualify

Cons
  • Large upfront payment

Pros Explained

  • No monthly payments: With a one-pay lease, you won’t have to worry about making monthly payments. You’ll only make one lump-sum payment at the beginning of the contract.
  • You’ll save on interest charges: Car dealers will often offer you a discount on the lease interest costs if you choose a one-pay lease, which can save you hundreds or thousands of dollars.
  • Easier to qualify: Someone with a poor or no credit history will often have a difficult time getting approved for a lease, which makes paying for the vehicle upfront with a one-pay car lease a helpful option.

Cons Explained

  • Large upfront payment: While a traditional automobile lease enables you to make affordable monthly payments throughout the contract period, one-pay leases require you to make one large payment at the beginning of the lease period.

The Bottom Line 

Before deciding if a one-pay lease is for you, you must decide if leasing a vehicle makes more sense than buying one. When you finance a car, your payments go toward ownership, but when you lease, payments apply to its depreciation during the lease period.

Some motorists prefer to lease an automobile because they can’t afford a down payment, and monthly lease payments are lower than a car loan. But the one-pay lease choice requires paying thousands of dollars upfront, something many people can’t afford.

One-pay leases are good options for people who may have difficulty financing or leasing an automobile. For those with credit issues, a one-pay lease might provide the best path for getting on the road—if they have enough cash.

Article Sources

  1. Edmunds. “​5 Car Lease Strategies You Didn’t Know About.” Accessed Jan. 26, 2022.

  2. Michigan.gov. “Leasing Process.” Accessed Jan. 26, 2022.

  3. Federal Reserve. “Keys to Vehicle Leasing: Comprehensive Consumer Guide.” Accessed Jan. 26, 2022.

  4. Endurance. "What Is a Car Lease Money Factor?" Accessed Jan. 26, 2022.